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HomeMy WebLinkAboutContract 43502 CITY SECRETARY q OIL AND GAS LEASE CONTRACT NO. THE STATE OF TEXAS § COUNTY OF TARRANT § THIS AGREEMENT ("Lease") is made and entered into as of the date herein specified by and between- CITY OF FORT WORTH, a home rule municipal corporation of the State of Texas located within Tarrant, Denton, and Wise Counties, Texas, (hereinafter referred to as "Lessor"), and, CHESAPEAKE EXPLORATION, L.L.C, an Oklahoma limited liability company, as Lessee, whose address is P.O. Box 18496, Oklahoma City, Oklahoma 73154 (hereinafter referred to as "Lessee"). WITNESSETH : 1. GRANTING CLAUSE Lessor, in consideration of a cash bonus in hand paid, of the royalties herein provided, and of the agreements of Lessee hereinafter contained, hereby grants, leases, and lets exclusively unto Lessee for the sole purpose of investigating, exploring, drilling, operating, and producing oil and/or gas from the land leased hereunder, together with any liquid or gaseous substances produced in association with oil and gas, the following described land situated in the City of Fort Worth, Texas described in Exhibit "A" attached hereto(the "leased premises"). All mineral substances and mineral rights other than oil and gas (and all other liquid or gaseous minerals produced in association with oil or gas) are expressly reserved to Lessor and excepted from this Lease. These reserved mineral rights include, but are not limited to, the rights to lignite, coal and sulfur not produced as a component of oil and gas. For the purpose of determining the amount of any bonus or other payment hereunder, said leased premises shall be deemed to contain 144.446 acres,whether actually containing more or less. OFFICIAL RECORD CITY SECRETARY FT. WORTH,TX 08—1 6— I i'J 4 :5 2 1 N 1 OIL AND GAS LEASE North Z.Boaz 120725 FINAL(4).doc 2. PRIMARY TERM Subject to the other provisions herein contained, this Lease shall be for a term of five (5) years from the date of the notarial acknowledgment of Lessor's execution of this instrument (hereinafter called "primary term") and so long thereafter as oil, gas or other minerals granted herein are produced from the leased premises or lands pooled therewith, in paying quantities, or operations are in progress thereon as hereinafter provided, and the royalties are paid as provided herein. At the end of the five (5) year initial term, Lessee shall have the option of renewing the lease for an additional three (3)years upon thirty (30) days advance written notice to the Lessor and payment of the original per acre bonus. For the purposes of this lease, the term "operations" means any of the following: drilling, testing, completing, reworking, recompleting, deepening, plugging back, or repairing of a well in search for or in the endeavor to obtain production of oil or gas, so long as such operations are carried out with due diligence with no cessation of more than ninety(90) consecutive days. 3. DELAY RENTALS This is a paid-up lease and no delay rentals are due. Upon termination, Lessee shall prepare, execute and deliver to Lessor a recordable release covering the leased premises in accordance with this Lease. Lessee may at any time or times execute and deliver to Lessor, a release or releases of this Lease as to all or any part of the leased premises, and thereby be relieved of all obligations as to the released land or interest, except for the indemnification obligations described in Paragraph 15 and the plugging obligations of this Lease. 4. ROYALTIES Lessee shall pay to Lessor the following royalties, which shall be free of all costs of any kind, including, but not limited to, costs of gathering, production, transportation, treating, compression, dehydration, processing, marketing, trucking or other expense, directly or indirectly incurred by Lessee, 2 OIL AND CAS LEASE North ZBoaz 120725 FINAL(4).doc whether as a direct charge or a reduced price or otherwise. In this regard, Lessee agrees to bear one hundred percent (100%) of all costs and expenses incurred in rendering hydrocarbons produced on or from the leased premises marketable and delivering the same into the purchaser's pipeline for immediate transportation to an end user or storage facility. Additionally, said royalties shall never bear, either directly or indirectly, under any circumstances, the costs or expenses (including depreciation) to construct, repair, renovate or operate any pipeline, plant, or other facilities or equipment used in connection with the treating, separation, extraction, gathering, processing, refining, compression, transporting, manufacturing or marketing of hydrocarbons produced from the leased premises or lands pooled therewith. A. On oil, gas (including flared gas) and casinghead gas, together with any other liquid or gaseous hydrocarbons recovered by Lease operations (such as in drips or separators) twenty-five percent (25%) of the proceeds of the sale or of the market value thereof, whichever is higher. Such proceeds of oil, gas and casinghead gas, together with any other liquid or gaseous hydrocarbons recovered by Lease operations, is to be delivered free of cost at the well or to the credit of the Lessor into pipelines, gathering lines, barges or other facilities to which the wells and tanks on the property may be connected. Lessor shall always have the right, at any time and from time to time, upon reasonable written notice to Lessee, to take Lessor's share of oil, gas and processed liquids in kind. Lessor may elect to take Lessor's gas in kind at the well, or at the point of delivery where Lessee delivers Lessee's gas to any third party. If gas is processed, Lessor may elect to take Lessor's share of the residue gas attributable to production from the leased premises, at the same point of delivery where Lessee receives its share of residue gas or has its share of residue gas delivered to a third party. Lessor may elect to have its royalty share of processed liquids stored in tanks at the plant or delivered into pipelines on the same basis as Lessee's share of liquids is stored or delivered. Lessor shall reimburse Lessee for all reasonable costs incurred by Lessee in installing, operating or maintaining additional facilities necessary for Lessor's royalty gas and processed liquids to be separately metered, accounted for, and delivered to a third party, but Lessor shall not be charged for any expense in the production, 3 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc gathering, dehydration, separation, compression, transportation, treatment, processing or storage of Lessor's share of gas and processed liquids. B. On products, twenty five percent (25%) of the gross market value or proceeds of sale thereof, whichever is higher. C. On residue gas or gas remaining after separation, extraction or processing operations, twenty five percent(25%) of the proceeds of sale or of the market value thereof, whichever is higher. D. For purposes of this Paragraph 4, the term "market value" shall mean for gas and products therefrom (i) the gross price at which gas or products therefrom are sold pursuant to a Gas Contract, as defined below, that is ratified by Lessor according to Paragraph G below or (ii) if not sold pursuant to a Gas Contract, as defined below, ratified by Lessor and Lessee, the highest gross price reasonably obtainable for the quantity of gas or products available for sale, through good faith negotiations for gas or products produced from the leased premises at the place where such gas or product is available for sale on the date of such a contract with adequate provisions for redetermination of price at intervals of no less frequency than one (1)year to ensure that the production is being sold for no less than the current market price. Included within the definition of"Market Value" as used herein is the presumption that Gas Contracts that are ratified by Lessor are arms-length contracts with purchasers who are not affiliates of Lessee. An "affiliate" includes, but is not limited to, the parent company or a subsidiary of Lessee, a corporation or other entity having common ownership with Lessee, a partner or joint venturer of Lessee with respect to the ownership or operation of the processing plant, a corporation or other entity in which Lessee owns a ten percent or greater interest, or any individual, corporation or other entity that owns a ten percent or greater interest in Lessee. In no event shall "market value" ever be less than the amount actually received by the Lessee for the sale of hydrocarbons. E. This Lease is intended to cover only oil and gas, but some other substances (including helium and sulphur) may be produced necessarily with and incidental to the production of oil or gas from the leased premises; and, in such event, this Lease shall also cover all such other substances so produced. On all such substances so produced under and by virtue of the terms of this Lease, Lessor 4 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc shall receive a royalty of twenty five percent (25%) of all such substances so produced and saved, same to be delivered to Lessor, free of all costs; or, at Lessor's election, Lessor's twenty five percent(25%) of such substances shall be sold by Lessee with Lessee's portion of such substances and at the same profit realized by Lessee for its portion of such substances. F. All royalties hereinabove provided shall be payable in cash (unless Lessor elects to take such royalty oil or gas in kind) to Lessor within sixty (60) days following the first commercial sale of production and thereafter no more than sixty (60) days after the end of the month following the month during which production takes place. Subject to the provisions of Paragraph 9 of this Lease concerning shut-in wells, royalties shall be paid to Lessor by Lessee and/or its assigns or by the product purchaser for oil and/or gas. Upon the failure of any party to pay Lessor the royalty as provided in this paragraph, Lessor may, at Lessor's option, elect to terminate this Lease by sending written notice to Lessee. Lessee shall then have thirty (30) days from the date of service of such written notice in which to avoid termination of this Lease by making or causing to be made the proper royalty payment or payments that should have been paid. If such royalty payment is not made on or before the expiration of the 30-day period, or written approval is not obtained from Lessor to defer such payment, Lessor may elect to terminate this Lease by filing a Notice of Termination with the County Clerk in the county where the leased premises are located. The effective date of said termination shall be the date said Notice of Termination is filed with the said County Clerk. G. Lessee agrees that it will not enter into any contract for the sale, delivery, transporting or processing of gas produced from the leased premises which shall extend more than two (2) years from the effective date of such sales contract unless such contract has adequate provisions for redetermination of price at intervals of no less frequency than one (1) year to ensure that production from this Lease is not being sold for less than the then current market value. At least thirty (30)days prior to the delivery or the execution of any contract for the sale, delivery, transporting or processing of gas produced from the leased premises, Lessee shall provide Lessor with a complete copy of each proposed contract for the purchase, transportation and/or processing of such gas that Lessee intends to execute (each a "Gas 5 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc Contract"), whereupon, Lessor shall have fifteen (15) days within which to either ratify such Gas Contract or notify Lessee in writing that it does not approve of such Gas Contract, including a statement of the reasons that Lessor does not approve of such Gas Contract (Lessor's failure to respond within the fifteen (15) days either by ratification or by written notice that it does not approve of the proposed Gas Contract shall be deemed to be Lessor's ratification of such Gas Contract). If Lessor ratifies the Gas Contract, Lessor shall be deemed bound by the terms of such Gas Contract (and, at Lessee's option, Lessor shall execute such Gas Contract as a party thereto) and the gas or products therefrom sold pursuant to such Gas Contract shall be deemed sold at market value based on the gross price stated therein. Lessee shall not amend or modify any material terms of a Gas Contract ratified by Lessor without the prior written consent of Lessor. If Lessor does not approve of a Gas Contract, Lessee shall consult with Lessor in an effort to agree to the terms of the proposed Gas Contract, and if the other party or parties to the Gas Contract agree to the changes or modifications to the Gas Contract which are proposed by Lessor in order for Lessor to ratify such Gas Contract, then Lessor shall be deemed to have ratified such Gas Contract (and, at Lessee's option, Lessor shall execute such Gas Contract as amended and modified, as a party thereto). If Lessor and Lessee cannot agree on the terms of a Gas Contract that are acceptable to the other party or parties thereto, Lessee may elect to execute such Gas Contract and sell, deliver, transport and process gas according to the terms thereof, subject to the other terms of this Paragraph 4 concerning the payment of Lessor's royalty on gas and products there from, including the right of Lessor to take its share of gas in kind. In the event Lessor elects to take and separately dispose of its royalty share of gas, the parties shall enter into a mutually acceptable balancing agreement providing for (a) the right of an under produced party to make up an imbalance by taking up to 150 percent of its share of production and (b) an obligation to settle any imbalance remaining after depletion in cash, based on the proceeds received by the overproduced party when the imbalance was created, or if the overproduced party's gas was used but not sold, based on the market value of the gas when imbalance was created. H. In the event Lessee enters into a gas purchase contract which contains what is commonly OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc referred to as a "take or pay provision" (such provision meaning that the gas purchaser agrees to take delivery of a specified minimum volume or quantity of gas over a specified term at a specified price or to make minimum periodic payments to the producer for gas not taken by the purchaser) and the purchaser under such gas purchase contract makes payment to Lessee by virtue of such purchaser's failure to take delivery of such minimum volume or quantity of gas, then Lessor shall be entitled to twenty five percent (25%) of all such sums paid to Lessee or producer under the "pay" provisions of such gas purchase contract. Such royalty payments shall be due and owing to Lessor within thirty (30) days after the receipt of such payments by Lessee. If the gas purchaser "makes up" such gas within the period called for in the gas contract and Lessee is required to give such purchaser a credit for gas previously paid for but not taken, then Lessor shall not be entitled to royalty on such "make up" gas. If Lessee is not producing any quantities of gas from the leased premises but is receiving payments under the "pay" portion of such "take or pay" gas purchase contract provision, such payments shall not relieve Lessee of the duty to make shut-in royalty payments if Lessee desires to continue this Lease, but such "take or pay" royalty payments shall be applied as a credit against any shut-in royalty obligation of the Lessee. Lessor shall be a third-party beneficiary of any gas purchase contract and/or transportation agreement entered into between Lessee and any purchaser and/or transporter of Lessor's gas, irrespective of any provision of said contracts to the contrary, and such gas purchase contract and/or transportation agreement will expressly so provide. Further, Lessor shall be entitled to twenty-five percent (25%) of the value of any benefits obtained by or granted to Lessee from any gas purchaser and/or transporter for the amendment, modification, extension, alteration, consolidation, transfer, cancellation or settlement of any gas purchase contract and/or transportation agreement. I. Lessee agrees that before any gas produced from the leased premises is used or sold off the leased premises, it will be run, free of cost to Lessor, through an adequate oil and gas separator of a conventional type or equipment at least as efficient, to the end that all liquid hydrocarbons recoverable from the gas by such means will be recovered and Lessor properly compensated therefor. J. Any payment of royalty or shut-in gas royalty hereunder paid to Lessor in excess of the 7 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc amount actually due to the Lessor shall nevertheless become the property of the Lessor if Lessee does not make written request to Lessor for reimbursement within one (1) year from the date that Lessor received the erroneous payment, it being agreed and expressly understood between the parties hereto that Lessor is not the collecting agent for any other royalty owner under the lands covered hereby, and a determination of the name, interest ownership and whereabouts of any person entitled to any payment whatsoever under the terms hereof shall be the sole responsibility of Lessee. It is further expressly agreed and understood that: (1) this provision shall in no way diminish the obligation of Lessee to make full and punctual payments of all amounts due to Lessor or to any other person under the terms and provisions of this Lease, and (ii) any overpayments made to the Lessor under any provisions of this Lease shall not be entitled to be offset against future amounts payable to parties hereunder. K. The terms of this Lease may not be amended by any division order and the signing of a division order by any mineral owner may not be made a prerequisite to payment of royalty hereunder. L. Oil, gas or products may not be sold to a subsidiary or affiliate of Lessee as defined herein without the Lessor's prior written permission. A Lessee shall pay Lessor royalty on all gas produced from a well on the leased premises and sold or used off the leased premises, regardless of whether or not such gas is produced to the credit of Lessee or sold under a contract executed by or binding on Lessee. Should gas be sold under a sales contract not binding on Lessee, Lessor's royalty will be calculated based on the highest price paid for any of the gas produced from the well from which such gas is produced. In no event will the price paid Lessor for Lessor's share of gas be less than the price paid Lessee for Lessee's share of gas. 5. POOLING Lessee shall have the right but not the obligation to pool the leased premises or interest therein with any other lands or interests, as to any or all depths or zones, and as to any or all substances covered by this lease, either before or after the commencement of production, whenever Lessee deems it necessary or proper to do so in order to prudently develop, produce or operate the 8 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc leased premises in compliance with the spacing rules of the appropriate lawful authority, or when to do so would promote the conservation of oil and gas in and under and that may be produced from said premises , however, if Lessee exercises such right, Lessee must pool all of the leased premises in one or more units. The unit(s) formed by such pooling for an oil well which is not a horizontal completion shall not exceed 80 acres plus a maximum acreage tolerance of 10%, and for a gas well or a horizontal completion shall not exceed 640 acres plus a maximum acreage tolerance of 10%; provided that a larger unit may be formed for an oil well or gas well or horizontal completion to conform to any well spacing or density pattern that may be prescribed or permitted by any governmental authority having jurisdiction to do so. For the purpose of the foregoing, the terms "oil well" and "gas well" shall have the meanings prescribed by applicable law or the appropriate governmental authority, or, if no definition is so prescribed, "oil well" means a well with an initial gas-oil ratio of less than 100,000 cubic feet per barrel and "gas well" means a well with an initial gas-oil ratio of 100,000 cubic feet or more per barrel, based on 24- hour production test conducted under normal producing conditions using standard lease separator facilities or equivalent testing equipment; and the term "horizontal completion" means an oil well in which the horizontal component of the gross completion interval in facilities or equivalent testing equipment; and the term "horizontal completion" means an oil well in which the horizontal component of the gross completion interval in the reservoir exceeds the vertical component thereof. In exercising its pooling rights hereunder, within 90 days of first production, Lessee shall file of record a written declaration describing the unit and stating the effective date of pooling which may be retroactive to first production. Production on which Lessor's royalty is calculated shall be that proportion of the total unit production which the net acreage covered by this lease and included in the unit bears to the total gross acreage in the unit. Pooling in one or 9 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc more instances shall not exhaust Lessee's pooling rights hereunder, and Lessee shall have the recurring right but not the obligation to revise any unit formed hereunder by expansion or contraction or both, either before or after commencement of production, in order to conform to the well spacing or density pattern prescribed or permitted by the governmental authority having jurisdiction, or to conform to any productive acreage determination made by such governmental authority, provided that Lessee include all of the leased premises in one or more unit. In making such a revision, Lessee shall file of record a written declaration describing the revised unit and stating the effective date of revision. To the extent any portion of the leased premises is included in or excluded from a particular unit by virtue of such revision, the proportion of unit production on which royalties are payable hereunder shall thereafter be adjusted accordingly. In the absence of production in paying quantities from a unit after commencement of production, or upon permanent cessation thereof, Lessee may terminate the unit by filing of record a written declaration describing the unit and stating the) date of termination. Pooling hereunder shall not constitute a cross-conveyance of interests. 6. CONTINUOUS DRILLING At the expiration of the primary term this Lease shall remain in full force and effect for so long as Lessee is conducting Continuous Drilling Operations (as herein defined), however, Lessee shall not have the obligation to commence drilling operations unless and until the price of gas is six dollars($6.00)per MCF on the NYMEX /Henry Hub. Once the price of gas meets the six dollar ($6.00) threshold, then the Lessee's obligation to Continuously Drill shall immediately begin. Lessee shall be considered to be engaged in Continuous Drilling Operations at the expiration of the primary term if. (1) Lessee is then engaged in drilling operations on the leased premises or lands pooled therewith or(2)Lessee has completed a well as a producer 10 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc or as a dry hole within three hundred sixty (360)days prior to the expiration of the primary term. Lessee also shall be considered to be engaged in Continuous Drilling Operations for so long thereafter as Lessee conducts drilling operations on the leased premises, or lands pooled therewith,with due diligence and with intervals of no more than three hundred sixty (360) days between the date of completion of one well and the date of commencement of drilling operations on an additional well. "Completion" shall be considered to be the date of release of the completion rig for a completed well, but in no event more than three hundred sixty (360) days following the release of the drilling rig. In the case of a dry hole, "completion"shall be considered to be the date of release of the drilling rig. "Commencement" shall be the actual spud date of a well. Continuous Drilling Operations shall be deemed to have ceased upon the failure of Lessee to commence drilling operations on an additional well within such three hundred sixty(360)day period. 7. OFFSET OnLIGATIONS In the event a well or wells producing oil or gas should be brought in on land within 330 feet from any boundary of the leased premises, Lessee agrees within sixty (60) days from commencement of production from such well or wells to commence the actual drilling of an offset well or wells on the leased premises; provided that the well or wells which are to be offset are producing in paying quantities and have been perforated and fraced within 330 feet of the leased premises; or Lessee shall release to Lessor free of this Lease the offsetting tract of at least one hundred twenty(120) acres. 8. FORCE MAJEURE A. The term "force majeure" as used herein shall mean and include: requisition, order, regulation, or control by governmental authority or commission; exercise of rights or priority or control 1 I OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc by governmental authority for national defense or war purpose resulting in delay in obtaining or inability to obtain either material, equipment or means of transportation normally necessary in prospecting or drilling for oil, gas or other mineral granted herein, or in producing, handling or transporting same from the leased premises; war, scarcity of or delay in obtaining materials or equipment; lack of labor or means of transportation of labor or materials; acts of God; insurrection; flood; strike; or other things beyond the control of Lessee. The term "force majeure" shall not include lack of markets for production or any other events affecting only the economic or financial aspects of drilling, development or production or the inability to conform to city, state or federal regulations. B. Notwithstanding any other provisions of this Lease, but subject to the conditions hereinafter set forth in this Paragraph 8, should Lessee be prevented by "force majeure" as defined above, from conducting drilling or reworking operations on, or producing oil, gas or other mineral from,the leased premises, such failure shall not constitute a ground for the termination of this Lease or subject said Lessee to damages therefore; and the period of time during which Lessee is so prevented shall not be counted against Lessee, but this Lease shall be extended for a period of time equal to that during which such Lessee is so prevented from conducting such drilling or reworking operations on, or producing oil, gas or other mineral from, such leased premises provided, however, that in no event will the primary term be extended unless Lessee has begun the actual drilling of a well prior to the date of the expiration of the primary term. All of the provisions of this paragraph are subject to each of the following express conditions: The terms and conditions of this paragraph shall not extend beyond the expiration date of any law, order, rule or regulation invoked under this paragraph, and shall be applicable and effective only during the following periods: (1) If the force majeure shall occur during the primary term of this Lease, it shall not operate to extend this Lease more than two (2) consecutive years beyond the expiration of the primary term. (2) If the force majeure shall occur during a three hundred sixty (360) day drilling or reworking period provided for in Paragraphs 6 hereof, after the primary term has 12 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc expired, then it shall not operate to extend the Lease more than two (2) successive years beyond the expiration of such three hundred sixty (360) day periods. (3) In no event will the primary term be extended unless Lessee has begun the actual drilling of a well prior to the date of the expiration of the primary term. C. None of the provisions of this paragraph shall ever be or become effective and applicable unless Lessee shall, within a reasonable time (not to exceed sixty (60)days in any event)after occurrence of the claimed event of force majeure above referred to, notify the Lessor, in writing, of such occurrence with full particulars thereof. D. The terms of this paragraph do not apply to monetary payments due under the terms of this Lease. 9. SHUT-IN GAS WELL PROVISIONS If at any time after the expiration of the primary term while there is a gas well on the leased premises or land pooled therewith which is capable of producing gas in paying quantities, but the production thereof is shut-in or suspended for any reason, and if this Lease is not then continued in force by some other provision hereof, then this Lease shall nevertheless continue in force as to such well and the pooled unit or proration unit allocated to it for a period of sixty(60)days from the date such well is shut-in or at the end of the primary term, whichever is the later date. Before the expiration of any such sixty (60) day period, Lessee or any Assignee hereunder may pay or tender to the Lessor a shut-in royalty equal to Five Thousand Dollars ($5,000.00) per shut-in gas well and if such payment or tender is timely made, this Lease shall continue in force but only as to said well or wells and the proration unit or the pooled unit allocated to it or them and it shall be considered that gas is being produced from said well or wells in paying quantities for one (1) year from the date such well or wells are shut-in, and in like manner one, and only one, subsequent shut-in royalty payment may be made or tendered and it will be considered that gas is being produced from said well or wells in paying quantities for such additional one (1)year period as well. 13 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc Lessee shall not be entitled to recover any shut-in royalty payments from the future sale of gas. Should such shut-in royalty payments not be made in a timely manner as provided in this section, it will be considered for all purposes that there is no production and no excuse for delayed production of gas from any such well or wells, and unless there is then in effect other preservation provisions of this Lease, this Lease shall terminate. Lessee shall pay or tender directly to the Lessor at the address as shown in Paragraph 18 all shut-in royalty payments as required by this Lease. 10. INFORMATION,ACCESS AND REPORTS A. Lessor shall have free access at all times to all wells, tanks, and other equipment that services wells under the leased premises, including drilling wells, and Lessee agrees to furnish Lessor, or Lessor's nominee, currently and promptly, upon written request, with full well information including cores, cuttings, samples, logs (including Schlumberger and other electrical logs), copies and results of deviation tests and directional and seismic surveys, and the results of all drill stem tests and other tests of other kind or character that may be made of wells on the leased premises. Lessor or Lessor's nominee shall be furnished with and have free access at all times to Lessee's books and records relative to the production and sale of oil, gas or other minerals from the leased premises, including reports of every kind and character to governmental authorities, State or Federal. Lessor shall have the right at its election to employ gaugers or install meters to gauge or measure the production of all minerals produced from the leased premises, and Lessee agrees to prepare and deliver to Lessor or Lessor's gauger or nominee duplicate run or gauge tickets for all minerals removed from the premises. Lessee shall furnish to Lessor daily drilling reports on each well drilled. B. Lessee shall furnish to Lessor, within a reasonable time after its execution, a copy of any gas purchase contract or transportation agreement entered into in connection with the leased premises, or if there is already a gas purchase contract or transportation agreement in effect due to Lessee's operations in the field,then a copy of that contract. Furthermore, a copy of any amendments to the gas purchase contract or transportation agreement shall be furnished said Lessor within thirty (30) days after execution thereof; 14 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc and on request of Lessor and without cost to the Lessor, Lessee shall furnish Lessor a copy of the following reports: core record, core analysis, well completion, bottom hole pressure measurement, directional survey records, electrical and induction surveys and logs, gas and oil ratio reports, paleontological reports pertaining to the paleontology of the formations encountered in the drilling of any wells on the leased premises, and all other reports which pertain to the drilling, completing or operating of the wells located on the leased premises. Such information shall be solely for Lessor's use, and Lessor shall in good faith attempt to keep same confidential for twelve(12) months after receipt. C. Lessee shall advise Lessor in writing of the location of each well to be drilled upon the leased premises or on land pooled therewith on or before thirty (30) days prior to commencement of operations, and shall advise Lessor in writing the date of completion and/or abandonment of each well drilled on the leased premises or on land pooled therewith within thirty (30) days after completion or abandonment. 11. PRESERVATION OF ECOLOGY OF LEASED PREMISES Any overflows or releases affecting the leased premises, including, but not limited to, salt water, mud, chemical, or oil shall be reported immediately to Lessor. Lessee shall not use any water in, on or under the leased premises without the prior written consent of the Lessor. 12. REMOVAL OF EQUIPMENT Lessee shall have the right at any time during or within six (6) months after the expiration of this Lease (but not thereafter) to remove all property and fixtures placed by Lessee on the leased premises, including the right to draw and remove all casing, except as to water wells as provided for in Paragraph 11. 15 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc This paragraph shall not apply to equipment or casing on or in an oil or gas well capable of producing in paying quantities, but Lessee shall be paid reasonable salvage value for any such casing or equipment. It is contemplated that Lessee may drill across and through lands covered by this agreement where production is not obtained or ceases. Where the casing or pipeline placed or laid through such non-producing lands is necessary to the production of a well or wells located on other lands covered by this Lease, or lands pooled therewith, it is expressly understood and agreed that Lessor will make no demand that such casing, pipelines or other equipment necessary for the production of a well or wells drilled by Lessee be removed as long as such casing, pipelines and other equipment is necessary for the production of a producing well or wells drilled by Lessee. 13. ASSIGNABILITY BY LESSEE This lease may be assigned in whole or in part by Lessee and the provisions shall extend to the heirs, executors, administrators, successors and assigns of the parties hereto; provided, however, that any such assignment by Lessee shall require the prior written consent of Lessor. All transfers by Lessee (including assignments, sales, subleases, overriding royalty conveyances, or production payment arrangements) must be recorded in the county where the lease premises are located, and the recorded transfer or a copy certified to by the County Clerk of the county where the transfer is recorded must be delivered to the Lessor within sixty (60) days of the execution date. Every transferee shall succeed to all rights and be subject to all obligations, liabilities, and penalties owed to the Lessor by the original Lessee or any prior transferee of the Lease, including any liabilities to the Lessor for unpaid royalties. No such transfer shall release the Lessee(or any subsequent transferor)from any obligation hereunder. 14. NO WARRANTY This Lease is given and granted without warranty of title, express or implied, in law or in equity. Lessor agrees that Lessee, at Lessee's option, may purchase or discharge, in whole or in part, any tax, mortgage or other lien upon the leased premises and thereupon be subrogated to the right of the holder 16 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc thereof, and may apply royalties accruing hereunder toward satisfying same or reimbursing Lessee. It is also agreed that if Lessor owns an interest in the oil and gas under the leased premises less than the entire fee simple estate therein, the royalties to be paid Lessor shall be reduced proportionately, but in no event shall the shut-in royalty amount for a gas well, as provided for in Paragraph 9 hereof, be reduced. 15. INDEMNITY LESSEE SHALL EXPRESSLY RELEASE AND DISCHARGE, ALL CLAIMS, DEMANDS, ACTIONS, JUDGMENTS, AND EXECUTIONS WHICH IT EVER HAD, OR NOW HAS OR MAY HAVE, OR ASSIGNS MAY HAVE, OR CLAIM TO HAVE, AGAINST THE LESSOR OR ITS DEPARTMENTS, AGENTS, OFFICERS, SERVANTS, SUCCESSORS, ASSIGNS, SPONSORS, VOLUNTEERS, OR EMPLOYEES, CREATED BY, OR ARISING OUT OF PERSONAL INJURIES, KNOWN OR UNKNOWN, AND INJURIES TO PROPERTY,REAL OR PERSONAL, OR IN ANY WAY INCIDENTAL TO OR IN CONNECTION WITH THE PERFORMANCE OF THE WORK PERFORMED BY THE LESSEE. THE LESSEE SHALL FULLY DEFEND, PROTECT, INDEMNIFY, AND HOLD HARMLESS THE LESSOR, ITS DEPARTMENTS,AGENTS, OFFICERS, SERVANTS, EMPLOYEES, SUCCESSORS,ASSIGNS, SPONSORS, OR VOLUNTEERS FROM AND AGAINST EACH AND EVERY CLAIM, DEMAND, OR CAUSE OF ACTION AND ANY AND ALL LIABILITY, DAMAGES, OBLIGATIONS, JUDGMENTS, LOSSES, FINES, PENALTIES, COSTS, FEES, AND EXPENSES INCURRED IN DEFENSE OF THE LESSOR, ITS DEPARTMENTS, AGENTS, OFFICERS, SERVANTS, OR EMPLOYEES, INCLUDING, WITHOUT LIMITATION, THE PAYMENT OF BONUS AND/OR ROYALTIES REGARDING OWNERSHIP OF THE LESSOR'S MINERAL INTEREST OF THE LEASED PREMISES WHICH MAY BE MADE OR ASSERTED BY LESSEE, ITS AGENTS, ASSIGNS, OR ANY THIRD PARTIES ON ACCOUNT OF, ARISING OUT OF, OR IN ANY WAY INCIDENTAL TO OR IN CONNECTION WITH 17 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc THE OWNERSHIP AND TITLE OF THE MINERAL INTEREST OF THE LESSOR UNDER THIS LEASE. THE LESSEE SHALL FULLY DEFEND, PROTECT, INDEMNIFY, AND HOLD HARMLESS THE LESSOR, ITS DEPARTMENTS, AGENTS, OFFICERS, SERVANTS, EMPLOYEES, SUCCESSORS, ASSIGNS, SPONSORS, OR VOLUNTEERS FROM AND AGAINST EACH AND EVERY CLAIM, DEMAND, OR CAUSE OF ACTION AND ANY AND ALL LIABILITY, DAMAGES, OBLIGATIONS, JUDGMENTS, LOSSES, FINES, PENALTIES, COSTS, FEES, AND EXPENSES INCURRED IN DEFENSE OF THE LESSOR, ITS DEPARTMENTS, AGENTS, OFFICERS, SERVANTS, OR EMPLOYEES, INCLUDING, WITHOUT LIMITATION, PERSONAL INJURIES AND DEATH IN CONNECTION THEREWITH WHICH MAY BE MADE OR ASSERTED BY LESSEE, ITS AGENTS,ASSIGNS, OR ANY THIRD PARTIES ON ACCOUNT OF, ARISING OUT OF, OR IN ANY WAY INCIDENTAL TO OR IN CONNECTION WITH THE PERFORMANCE OF THE WORK PERFORMED BY THE LESSEE UNDER THIS LEASE. THE LESSEE AGREES TO INDEMNIFY AND HOLD HARMLESS THE LESSOR, ITS OFFICERS, AGENTS, SERVANTS, EMPLOYEES, SUCCESSORS, ASSIGNS, SPONSORS, OR VOLUNTEERS FROM ANY LIABILITIES OR DAMAGES SUFFERED AS A RESULT OF CLAIMS, DEMANDS, COSTS, OR JUDGMENTS AGAINST THE LESSOR, ITS DEPARTMENTS, ITS OFFICERS, AGENTS, SERVANTS, OR EMPLOYEES, CREATED BY, OR ARISING OUT OF THE ACTS OR OMISSIONS OF THE LESSOR OCCURRING ON THE DRILL SITE OR OPERATION SITE IN THE COURSE AND SCOPE OF INSPECTING AND PERMITTING THE GAS WELLS INCLUDING, BUT NOT LIMITED TO, CLAIMS AND DAMAGES ARISING IN WHOLE OR IN PART FROM THE NEGLIGENCE OF THE LESSOR OCCURRING ON THE DRILL SITE OR OPERATION SITE IN THE COURSE AND SCOPE OF INSPECTING AND PERMITTING THE GAS WELLS. IT IS UNDERSTOOD AND AGREED THAT THE INDEMNITY PROVIDED FOR IN THIS SECTION IS AN INDEMNITY 18 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc EXTENDED BY THE LESSEE TO INDEMNIFY AND PROTECT LESSOR AND/OR ITS DEPARTMENTS, AGENTS, OFFICERS, SERVANTS, OR EMPLOYEES FROM THE CONSEQUENCES OF THE NEGLIGENCE OF THE LESSOR AND/OR ITS DEPARTMENTS, AGENTS, OFFICERS, SERVANTS, OR EMPLOYEES, WHETHER THAT NEGLIGENCE IS THE SOLE OR CONTRIBUTING CAUSE OF THE RESULTANT INJURY, DEATH, AND/OR DAMAGE. 16. INSURANCE Lessee shall provide or cause to be provided the insurance described in the City of Fort Worth Gas Ordinance for each well drilled under the terms of this Lease, such insurance to continue until the well is abandoned and the site restored. Such insurance shall provide that Lessor shall be a co-insured, without cost, and that said insurance can not be canceled or terminated without thirty (30) days prior notice to Lessor and ten (10) days notice to Lessor for nonpayment of premiums. 17. RELEASES REQUIRED Within thirty (30) days after the partial termination of this Lease as provided under any of the terms and provisions of this Lease, Lessee shall deliver to Lessor a plat showing the production units designated by Lessee, copies of logs showing depths to be retained within each unit, and a fully executed, recordable release properly describing by metes and bounds the lands and depths to be retained by Lessee around each producing well. If this Lease terminates in its entirety, then Lessee shall deliver a complete, fully executed, recordable release to Lessor within thirty (30) days. If such release complies with the requirements of this section, Lessor shall record such release. If Lessee fails to deliver a release complying with the requirements of this section within thirty (30) days after Lessor's demand therefore, then Lessee shall pay Lessor an amount equal to Five Dollars($5.00) per acre per day for each acre of the leased premises that should have been released, beginning with the 30th day after the date of Lessor's 19 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc request and continuing until such release has been executed and delivered to Lessor. It is agreed that actual damages to Lessor for Lessee's failure to deliver such release are difficult to ascertain with any certainty, and that the payments herein provided are a reasonable estimate of such damages and shall be considered liquidated damages and not a penalty. Furthermore, Lessor is hereby authorized to execute and file of record an affidavit stating that this Lease has expired and the reason therefor, and such affidavit shall constitute prima facie evidence of the expiration of this Lease or any part of this Lease. is. NOTICES A. Notifications Required. Lessee shall advise Lessor in writing of the location of each well to be drilled upon the leased premises or on land pooled therewith on or before thirty (30) days prior to commencement of operations, and shall advise Lessor in writing the date of completion and/or abandonment of each well drilled on the leased premises or on land pooled therewith within thirty (30) days after completion or abandonment. Such notice shall include furnishing the Lessor a copy of the applicable completion or plugging report filed with any governmental or regulatory agency and a plat or map showing the location of the well on this Lease or lands pooled therewith. Reports are also to be made monthly, to include (1) name of well, total monthly production and total product sales and (2) lease activity report to include drilling, testing, fracing, completing, reworking, recompleting, plugging back, repairing and abandonment of the well and (3) compliance with the Minority/Women Business Enterprise (MWBE) Goal of 3% for leases over 40 acres. B. All notices, information, letters, surveys, reports, material, and all other documents, required or permitted to be sent to Lessor by Lessee shall be sent by certified United States mail, postage prepaid, return receipt required,to the following address: 20 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc City of Fort Worth Attention: Director, Planning and Development Department 1000 Throckmorton Street Fort Worth,Texas 76102 C. All notices required or permitted to be sent to Lessee by Lessor shall be sent to Lessee by certified United States mail, postage prepaid, return receipt requested to the following address: Chesapeake Exploration, LLC Attention: Mr. Henry Hood P.O. Box 18496, Oklahoma City, Oklahoma 73154 D. Service of notices, and other documents, hereunder is complete upon deposit of the mailed material in a post office or official depository under the care and custody of the United States Postal Service, in a postpaid, properly addressed and certified wrapper. E. Any party hereto shall have the right to change the name or address of the person or persons required to receive notices, and other documents, by so notifying the other party in writing. 19. BREACH BY LESSEE Lessee shall conduct Lessee's operations in strict compliance with all of the terms and provisions of this Lease and with all applicable local, state and federal rules and the regulations of any regulatory body having jurisdiction of such operations including, but not limited to, all local, state and federal environmental rules and regulations and applicable city ordinances. In the event Lessor considers that operations are not, at any time, being conducted in compliance with this Lease, or any implied covenant of this Lease, Lessor shall notify Lessee in writing of the facts relied upon as constituting a breach of any express or implied covenant or obligation of Lessee hereunder and, Lessee, if in default, shall have sixty (60) days after receipt of such notice in which to commence compliance with its obligations hereunder. Failure on the part of Lessee to timely commence efforts to rectify any such breach and to exercise diligence in remedying any such breach shall operate as a forfeiture of this 21 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc Lease as to the portion thereof effected by such breach; provided that if Lessee, in good faith, disputes any alleged grounds of breach set forth in such notice, Lessee may, within said sixty(60) day period, institute a Declaratory Judgment Action in any District Court in a county where all or part of the said leased premises are located questioning whether it has in fact breached any expressed or implied covenant of this Lease, thereby staying any forfeiture during the pendency of such action. However, in the event that Lessor obtains a final judicial ascertainment in any such proceeding that Lessee is in breach of any covenant hereof, express or implied,then it is agreed that Lessor shall be entitled to a decree providing for cancellation or forfeiture of the Lease in the event such breach is not rectified or commenced in good faith to be rectified by Lessee within thirty(30)days from date such decree becomes final. 20. LOCATION OF DRILLING ACTIVITY,PIPELINES AND EQUIPMENT No drilling or other activity shall be conducted on the surface of the leased premises and no roads, electric lines, pipelines, equipment, or other structures shall be placed on the surface of the leased premises. 21. COMPLIANCE WITH LAWS Lessee shall comply with all applicable rules, regulations, ordinances, statutes and other laws in connection with any drilling, producing or other operations under the terms of this Lease, including, without limitation, the oil and gas well regulations of the City of Fort Worth. 22. CONFLICT OF INTEREST Lessee represents that Lessee; its officers and directors, are not employees or officers of the City of Fort Worth nor is Lessee (its officers and directors)acting on behalf of any such officer or employee of the City of Fort Worth. 23. 22 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc TERMS All of the terms and provisions of this Lease shall extend to and be binding upon the heirs, executors, administrators, successors and authorized assigns of the parties hereto. 24. ENTIRE AGREEMENT This Lease states the entire contract between the parties, and no representation or promise, verbal or written, on behalf of either party shall be binding unless contained herein; and this Lease shall be binding upon each party executing the same, regardless of whether or not executed by all owners of the above described land or by all persons above named as "Lessor", and, notwithstanding the inclusion above of other names as "Lessor", this term as used in this Lease shall mean and refer only to such parties as execute this Lease and their successors in interest. 25. CAPTIONS The captions to the various paragraphs of the Lease are for convenience only, to be used primarily to more readily locate specific provisions. They shall not be considered a part of the Lease, nor shall they be used to interpret any of the Lease provisions. 26. COUNTERPARTS This Lease may be executed in multiple counterparts, each of which shall be deemed an original, with the same effect as if the signature thereto and hereto were upon the same instrument. 27. INTERPRETATION In the event of any dispute over the meaning or application of any provision of this Lease, this Lease shall be interpreted fairly and reasonably, and neither more strongly for or against any party, regardless of the actual drafter of this Lease. 28. 23 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc NO THIRD PARTY RIGHTS The provisions and conditions of this Lease are solely for the benefit of the Lessor and the Lessee, and any lawful assign or successor of the Lessee and are not intended to create any rights, contractual or otherwise, to any other person or entity. 29. SEVERABILITY If any provision of this Lease shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired. 30. VENUE AND JURISDICTION If any action, whether real or asserted, at law or in equity, arises on the basis of any provision of this Lease, venue for such action shall lie in state courts located in Tarrant County, Texas or the United States District Court for the Northern District of Texas — Fort Worth Division. This Lease shall be construed in accordance with the laws of the State of Texas. 31. INDEPENDENT CONTRACTOR It is expressly understood and agreed that Lessee shall operate as an independent contractor in each and every respect hereunder and not as an agent, representative or employee of the Lessor. Lessee shall have the exclusive right to control all details and day-to-day operations relative to this Lease and all Exhibits and shall be solely responsible for the acts and omissions of its officers, agents, servants, employees, contractors, subcontractors, licensees and invitees. Lessee acknowledges that the doctrine of respondeat superior will not apply as between the Lessor and Lessee, its officers, agents, servants, employees, contractors, subcontractors, licensees and invitees. Lessee further agrees that nothing in this Lease will be construed as the creation of a partnership or joint enterprise between the Lessor and Lessee. 32. GOVERNMENTAL POWERS It is understood that by execution of this Lease, the Lessor does not waive or surrender any of it governmental powers. 24 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc EXECUTED and effective as of the date of the notarial acknowledgment of the Lessor's execution. LESSOR: CITY OF FORT WORTH By: �� ��-- ATTEST: - —� Assistant City Manager 4� C' ecretary7 U JEi'010000 00 awr4� a�.0 o a ¢ O 00-4 la 0 APPROVED AS TO FORM AND LEGALITY: c 0 CQ o 'd Opoo°* By: leu YL I J C� � _Z L-1 j��2�I nn� a��� Assistant Gdy Attorney Contract Authorization Date: <I/q a Z Date ACKNOWLEDGEMENT THE STATE OF TEXAS § COUNTY OF TARRANT § BEFORE ME, the undersigned, a Notary Public, on this day personally appeared Fernando Costa, Assistant City Manager of the City of Fort Worth, a home-rule municipal corporation of the State of Texas, known to me to be the person whose name is subscribed to the foregoing instrument and, that(s)he has executed the same for the purposes and consideration therein expressed. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 15' day oflz# o12. [SEAL] Notary Public in and for the State of Texas My Commission Expires: Print Name of Notary Public Here OFFICIAL RECORD CITY SECRETARY 25 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc FT. WORTH, TX LESSEE: CHESAPEAKE EXPLORATION, LLC, an Oklahoma limite liability company By: Cliff J. Merri Its: Vice President—Land, Southern Division Date: ACKNOWLEDGEMENT THE STATE OF OKLAHOMA § COUNTY OF b0UV\0Y'yka-- § BEFORE ME, the undersigned, a Notary Public, on this day personally appeared Cliff J. Merritt, Vice President — Land, Southern Division, on behalf of Chesapeake Exploration, L.L.C., an Oklahoma Limited Liability Company, known to me to be the person whose name is subscribed to the foregoing instrument and, that he has executed the same for the purposes and consideration therein expressed. GIVEN UNDER MY HAND AND SEAL OF OFFICE thisy da of � , 2012. �S!b— State v Notary Public in and for the of T ````N��Nutl/1������� My Commis on Expires: Print Name of Notary Public Here Z NOT# . (DE EXP• CLj/26h6 rt OPttI0KA- 26 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc EXHIBIT A BEING 144.446 acres land, more or less, situated in the Heirs of Hays Covington Survey Abstract Number 256 and the Edward Wilburn Survey Abstract Number 1679, in the City of Fort Worth, Tarrant County, Texas, being a portion of that certain tract of land as described in deed to the City of Fort Worth as recorded in Instrument Number D211206523, that certain tract of land as described in deed as Parcel No. 3 as recorded in Volume 1492, Page 343, a portion of Lot 16 thru Lot 21, Block 6 Alta Mere Addition, an addition to the City of Fort Worth as recorded in Volume 1037, Page 413 of the Deed Records of Tarrant County, Texas, those certain tracts of land as shown in Plat as Lot 5 thru Lot 7 of Block 16 of Z. Boaz Country Place Addition, an addition to the City of Fort Worth as recorded Volume 204, Page 93 of the Plat Records of Tarrant County, Texas, and being more particularly described by metes and bounds as follows: BEGINNING in the centerline intersection of Calmont Avenue (variable right-of-way width) and Lackland Road (60 foot right-of-way width) (NAD27 grid northing 388,309.15 and easting 2,020,203.74), from which a found five-eighths inch steel rebar (controlling monument) bears N 14° 04' 21" E , a distance of 346.29 feet in the intersection of the easterly right-of-way line of said Lackland Avenue and the southerly right-of-way line of Interstate Highway 30 (variable right-of-way width), for the northwesterly corner of that certain tract of land as described in deed to Lindsay Bradford Holland as recorded in Volume 14908, Page 222 of said Deed Records; 1. THENCE, S 090 06' 00" W, departing the centerline of said Calmont Avenue, along the centerline of said Lackland Road, a distance of 23.21 feet to a point; 2. THENCE, S 000 27' 51" W, continuing along the centerline of said Lackland Road, a distance of 3,199.89 feet to a point, from which a found one-half inch steel rebar bears S 450 30' 39" E , a distance of 40.49 feet; 3. THENCE, N 890 32' 09" W, departing the centerline of said Lackland Road, a distance of 430.00 feet to the northwesterly corner of Lot 8 and the southwesterly corner of Lot 7, Block 16 of said Z. Boaz Country Place Addition; 4. THENCE, S 000 27' 33" W, along the westerly line of said Z. Boaz Country Place Addition, a distance of 1,329.51 feet to a point in the northeasterly right-of-way line of Camp Bowie West (variable right-of-way width) and the southwesterly corner of that certain tract of land as described in deed to Dale R. Green and Norma J. Green as recorded in Volume 14467, Page 138 of said Deed Records, from which a found one-half inch steel rebar bears S 610 13' 16" E , a distance of 1.95 feet; 5. THENCE, N 820 44' 14" W, along the northeasterly right-of-way line of said Camp Bowie West, a distance of 998.94 feet to a point; 6. THENCE, N 890 30' 01" W, departing the northeasterly right-of-way line of said Camp Bowie West, a distance of 57.14 feet to a point in the centerline of the abandoned Irene Drive (60 foot right- of-way width), from which a found one-half inch steel rebar(controlling monument ) bears S 120 23' 40" W , a distance of 147.54 feet in the southwesterly right-of-way line of said Camp Bowie West and the westerly right-of-way line of existing Irene Drive (variable right-of-way width), for the northeasterly corner of Lot 1, Block 1 Steak and Ale Addition, an addition to the City of Fort Worth as recorded in Cabinet 388-65, Slide 29 of said Plat Records; 27 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc 4 7. THENCE, N 000 29' 59" E, continuing along the centerline of said abandoned Irene Drive, a distance of 2,352.21 feet to a point in the centerline intersection of said abandoned Irene Drive and abandoned Slocum Avenue (60 foot right-of-way width); 8. THENCE, N 89° 30' 22" W, along the centerline of said abandoned Slocum Avenue, a distance of 129.93 feet to a point; 9. THENCE, N 130 00' 40" W, departing the centerline of said abandoned Slocum Avenue, a distance of 30.09 feet to a point in the northerly right-of-way line of said abandoned Slocum Avenue; 10. THENCE, N 890 30' 22" W, along the northerly right-of-way line of said abandoned Slocum Avenue, a distance of 10.70 feet to a point as the southwest corner of said Parcel No. 3, said point also being in the easterly line of that certain tract of land as shown in Plat as Lot 1R1 of Block 14A Alta Mere Addition, an addition to the City of Fort Worth as recorded in Volume 388-103, Page 455 of said Plat Records and the beginning of a curve to the right; 11. THENCE, Northwestwardly, along said curve to the right and the westerly line of Parcel No. 3, having a central angle of 120 34' 18", a radius of 1,538.74 feet, and an arc length of 337.63 feet, the chord bears N 060 05' 30" W, a distance of 336.95 feet to a point in the easterly line of that certain tract of land as shown in Plat as Lot IRA of Block 14A Alta Mere Addition, an addition to the City of Fort Worth as recorded in Cabinet B, Slide 3396 of said Plat Records; 12, THENCE, N 000 11' 39" W, continuing along said westerly line of Parcel No. 3 and the easterly line of said Lot IRA of Block 14A Alta Mere Addition, a distance of 421.63 feet to a point in the centerline of abandoned Rosewood Avenue (60 foot right-of-way width), said point also being in the westerly line of abandoned Railroad right-of-way (variable right-of-way width) described in deed to Texas& Pacific Railroad as recorded in Volume 1492, Page 343 of said Deed Records; 13. THENCE, S 89° 31' 09" E, departing said westerly line of Parcel No. 3, a distance of 40.62 feet to a point in the centerline of abandoned Texas & Pacific Railroad (right-of-way); 14. THENCE, N 000 00' 20" W, along the centerline of abandoned Texas & Pacific Railroad (right-of- way), a distance of 394.18 feet to a point; 15. THENCE, S 890 45' 55" E, departing the centerline of Texas & Pacific Railroad (right-of-way), a distance of 40.76 feet to a point in the easterly line of said abandoned Texas & Pacific Railroad (right-of-way); 16. THENCE, N 000 11' 39" E, along the easterly line of said abandoned Texas & Pacific Railroad (right-of-way), a distance of 361.79 feet to a point in the southerly line of that certain land as shown in Plat as Lot 6AR2 of Block 5 Alta Mere Addition, an addition to the City of Fort Worth as recorded Cabinet B, Slide 2751 of said Plat Records; 17. THENCE, S 89° 31' 00" E, a distance of 112.62 feet to a point; 18. THENCE, N 000 29' 59" E, a distance of 488.94 feet to a point in the centerline of said Calmont Avenue; 19. THENCE, N 88° 29' 06" E, along the centerline of said Calmont Avenue, a distance of 1,480.58 feet to the POINT OF BEGINNING and containing 6,292,075 square feet or 144.446 acres of land, more or less. 28 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc Basis of Bearing is the Texas State Plane Coordinate System, Texas North Central Zone 4202, North American Datum 1927 (NAD27). (NORTH Z BOAZ) 29 OIL AND GAS LEASE North ZBoaz 120725 FINAL(4).doc City of Fort Worth, Texas Mayor and Council Communication COUNCIL ACTION: Approved on 8/14/2012 DATE: Tuesday, August 14, 2012 REFERENCE NO.: L-15424 LOG NAME: 06N Z BOAZ LEASE SUBJECT: Authorize Lease Agreement with Chesapeake Exploration, LLC, in the Amount of$110,595.50 for Natural Gas Drilling Under 140 Acres of North Z Boaz Park and Golf Course Located at 3200 Lackland Road (COUNCIL DISTRICT 3) RECOMMENDATION: It is recommended that the City Council authorize a lease Agreement for natural gas drilling under 140 more or less of City-owned properties known as North Z Boaz Park and Golf Course with Chesapeake Exploration, LLC, for a five-year primary term. DISCUSSION: On September 27, 2011, (M&C L-15258) the City Council approved City Secretary Contract No. 42203 with the Heirs of Z Boaz Park south and North Z Boaz Park and Golf Course for release of deed reverter terms in exchange for the heirs retaining a 40 percent interest in the mineral estate. As part of the Mineral Agreement for release of the deed reverter terms, the City agreed to use 17 percent of all royalties, bonus proceeds and any other sums received by the City in connection with the oil, gas and other minerals for the upkeep, maintenance and beautification of the properties. On November 1, 2011, (M&C L-15279) the City Council held a public hearing and authorized use of the subsurface of North Z Boaz Park and Golf Course for the drilling and extraction of natural gas from an off site location. On May 8, 2012, (M&C L-15361) the City Council authorized rejection of the bid from Chesapeake Exploration, LLC, for natural gas drilling under North Z Boaz Park and Golf Course because the bid failed to comply with minimum bid requirements, and authorized Staff to bid or negotiate a lease at a future time. Staff subsequently negotiated the following lease terms with Chesapeake Exploration, LLC: . $1,250.00 per acre bonus ($110,595.50 total bonus); . Twenty-five percent royalty; and • Five year lease term with option to renew for three years at the initial bonus per acre price. North Z Boaz Park and Golf Course is estimated to contain a total of 140 acres, more or less, of which the City retains a 60 percent mineral interest or 84 net mineral acres. Because there are streets surrounding North Z Boaz Park and Golf Course and mineral ownership is calculated to the center of the street, the net mineral acreage for leasing this property will be 88.476 net mineral acres. The City has established a Minority Women Business Enterprise (M/WBE) participation goal of three percent on City-owned property of 40 acres or more without an investment goal. On leases of City-owned Logname: 06N Z BOAZ LEASE Page 1 of 2 property of 700 acres or more, the City has established an option of either a three percent M/WBE goal or the inclusion of an M/WBE investor. The negotiated lease requires Chesapeake to meet or exceed the three percent M/WBE goal established by the City of Fort Worth. Revenues received from this lease will be deposited according to the Mineral Agreement with the heirs (CSO No. 42203) which directs 17 percent of all gas related revenues be dedicated to North Z Boaz Park and Golf Course and per the current Financial Management Policy Statements (M&C G-17470 approved December 13, 2011) which direct bonus, royalty and other natural gas related fee revenue derived from designated golf course property to be allocated in the following manner: i. Fifty percent of the revenue will be used to retire existing debt in the Municipal Golf Fund and upon retirement of all debt, the revenue will be applied to the reserve fund balance until such time that the required fund policy reserve of 10 percent in excess of the annual operating budget is achieved; and ii. Fifty percent of the revenue will be used to cash fund golf capital improvement projects. The property is located in COUNCIL DISTRICT 3, Mapsco 74J and 74N. FISCAL INFORMATION / CERTIFICATION: The Financial Management Services Director certifies that the Planning and Development Department is responsible for the collection and deposit of funds due the City under this Agreement. FUND CENTERS: TO Fund/Account/Centers FROM Fund/Account/Centers P243 446100 801929968700 $18,801.24 P243 446100 801929990100 $45,897.13 D102 446100 0132000 $45,897.13 CERTIFICATIONS: Submitted for City Manager's Office by: Fernando Costa (6122) Originating Department Head: Randle Harwood (6101) Additional Information Contact: Jean Petr (8367) ATTACHMENTS 1. M&C ZBOAZ 07-27-2012.pdf (Public) Logname: 06N Z BOAZ LEASE Page 2 of 2